European Oil Companies Support Climate Action

Ten of the world’s largest oil and gas companies, who make up a group called the Oil and Gas Climate Initiative (OGCI), say they support efforts by the United Nations to limit global warming. But they made no commitments to take action themselves, and American energy companies haven’t even joined the organization.

The CEOs of the companies from Britain, France, Italy, Mexico, the Netherlands, Norway, India and Saudi Arabia issued a report at a Paris news conference on Oct. 16 outlining their backing of the U.N. goal to keep the Earth’s average temperature from rising more than 2 degrees Celsius (3.6 degrees Fahrenheit) beyond the planet’s pre-industrial levels of the 19th century.

“Our shared ambition is for a 2-degree Celsius future,” the OGCI said in a joint statement. “It is a challenge for the whole of society. We are committed to playing our part.”

The commitment was voiced by the BG Group, BP, Eni, Pemex, Reliance Industries, Repsol, Royal Dutch Shell, Saudi Aramco, Statoil and Total, but there was no word from U.S. companies. And while the 10 members of the initiative provide about 10 percent of the word’s energy demands, they promised no specific actions of their own to combat climate change.

They limited their commitment to the goal of the U.N. climate conference, also in Paris, from Nov. 30 through Dec. 11. The 32-page OGCI report left the responsibility for limiting the rise in Earth’s temperature with governments to issue regulations encouraging industry “to take informed decisions and make effective and sustainable contributions to addressing climate change.”

In their statement introducing the report, the 10 companies said they recognized that “the existing trend of the world’s net global greenhouse gas emissions is not consistent with this ambition” because 21st-century industry and travel are generating so much carbon dioxide.

The average global temperature already has risen by nearly 0.85 of a degree Celsius, or 1.53 degrees Fahrenheit, between 1880, when such record-keeping began, and 2012. Many climate scientists attribute this rise to carbon emissions caused by the use of fossil fuels.

Neil Beveridge, an oil analyst with the investment research firm Sanford C. Bernstein and Co., said he welcomed the move by the OGCI to acknowledge its members’ role in climate change. “It is a big, big step for such a large number of companies to gather,” he said. “Over the years, a lot of companies have been in denial on this issue.”

But if the OGCI is committed to doing little more than to acknowledge the problem, U.S. companies seem ready to do even less because of what they see as the economics of reform. Proposed solutions include carbon trading and higher taxes on fossil fuels, both of which are seen as putting upward pressure on the price of energy.

“I’ve never had a customer come to me and ask to pay a higher price for oil, gas or other products,” Chevron CEO John Watson said at an OPEC meeting in June in Vienna. Rex Tillerson, ExxonMobil’s CEO, agrees. He has often said he would not support such limits on carbon unless they were “revenue neutral.”

Claudio Descalzi, the CEO of Italy’s Eni, told The New York Times that he believes some sort of carbon tax is inevitable. But he said the OGCI made a point of leaving that out of the report as a way of attracting more oil companies to join the group.

“Carbon pricing is the only way to have a reasonable energy mix” to sustain the 2-degree limit, Descalzi said. But for now, he added, the OGCI is skirting that issue in an effort “to create a consensus” in the industry.

What is the point of indicating that it shares "the ambition for 2C containment" without actually recommending actual policy terms to achieve it?

Even if the 2C containment target is now fundamentally beyond any foreseeable level of government intervention to achieve it , would it still not be in the fundamental interests of all major oil companies to go beyond embracing carbon pricing conceptually and put down real terms?

Obviously carbon pricing should be done via an economy-wide, transparent carbon tax applied at the point of combustion. The initial range would likely be on the order of $30-40/tonne of emitted carbon. Funds derived from such a tax can in part be applied towards adaptation and low carbon technology development. How it would rise over time ultimately will be a political decision, that will have to integrate both climate and near term economic considerations.

Ultimately, the world will likely have to come to terms with adaptation and climate engineering to deal with the risk, but implementing carbon pricing can't be avoided as well.
At some point, the leadership of the major hydrocarbon entities have to embrace carbon pricing beyond high concept, and to actual implementable terms.

Leave a comment

Name

Email

Captcha

Comment

We will save the information entered above in our website. Your comment will then await moderation from one of our team. If approved, your data will then be publically viewable on this article. Please confirm you understand and are happy with this and our privacy policy by ticking this box. You can withdraw your consent, or ask us to give you a copy of the information we have stored, at any time by contacting us.